Provide an overview of the company and/or industry and add any pertinent information relevant to the case (5 points) The overall competitive forces working on the Warehouse Club industry are fairly average. The highest pressure in the industry comes from industry rivalry and the availability of substitutes. Buyer bargaining power, supplier bargaining power, and threat of entry are relatively weak. Costco controls about 56% of the market, Sam’s Club controls about 36%, and BJ’s and any other warehouse retailers control about 8%.
1. Do all three warehouse club rivals – Costco, Sam’s, and BJ’s Wholesale – have highly similar strategies? What differences in their strategies are apparent? Does one rival have a better strategy that the others? Does one rival have a somewhat weaker strategy than the other two? (15 points) All three use the a low-cost provider strategy and have fairly low product differentiation. Costco clearly has the superior strategy out of the three competitors and are operating at a high level.
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Sam’s is the closest to being a threat to Costco but needs to adjust their strategy as it pertains to appealing to consumers. BJ’s has the weakest strategy and operates on a regional level with no apparent plans for significant expansion.
2. Five years from now, is Costco’s standing as the industry leader likely to be stronger or weaker? Are the other two rivals likely to gain or lose ground on Costco? Why or why not? (15 points) Sam’s club does have more international locations but Costco has a strong growth strategy and an abundance of resources to exapnd internationally. Sam’s will need to expand their clientele if they wish to gain ground on Costco. BJ’s is lagging behind and will likely lose ground if they cease to expand operations like there competitors are doing.
4. What recommendations would you like to make to Jim Sinegal regarding the actions that Costco management needs to take to sustain the company’s growth and improve its financial performance? (15 points) The current strategy Costco’s is implementing is working. They should continue to build new warehouses both in the U.S and overseas. They should continue to attract new members and strive to create customer loyalty. They should also continue using their merchandising techniques in order to increase sales. Jim, on a more personal level, should begin to groom those under him to ensure his company has continued success and that someone can effectively take his place after he is no longer with the company.
5. What actions do you think management at Sam’s Club should take to boost revenue growth and overall financial performance? (10 points) In order for Sam’s to continue to perform it may be necessary for them to imitate some of Costco’s strategy and begin to stock more luxury products. This will expand their clientele by appealing to a more upscale class of consumers and in effect could steal some of the markets that Costco’s operates in. If implemented correctly, this would effectively improve their overall financial performance.
6. What actions do you think management at BJ’s Wholesale should take to boost revenue growth and overall financial performance? (10 points)
BJ’s doesn’t seem to have the resources or an effective growth strategy to compete with their competitors. As result they should carefully continue to attempt to expand into other locations with the goal of increasing sales. If they continue down the current path its possible they could go out of business or even become an acquisition of one of their competitors. To avoid this it may be necessary to merge with smaller competitors in order to complete their expansion and increase their overall financial performance.